Business Ethics in China: Challenges and Opportunities

By Margaret Steen

Four panelists offered their views on “Business Ethics in China: Challenges and Opportunities” at the Markkula Center for Applied Ethics’ fourth biennial business ethics conference on March 9. The topic of the conference was “Business Ethics in a Global World with a focus on China and India.

Baocheng Liu discussed how the confluence of three philosophical traditions in China – Daoism, Confucianism and Buddhism – has contributed to what he called “the great coherence of the Chinese culture.” Liu, who is dean of the Sino-French School of International Management in Beijing, noted that despite invasions and wars, “this country remains as it is.”

“The confluence and also the integration of these three great philosophies continue to bond China,” Liu said. They also offer insight into building a stakeholders’ society, which the Chinese might call a “harmonious society.”

L-R :Baocheng Liu and C.S. Park

L-R: C.S. Park and James O'Toole

C.S. Park, a member of the board of directors of Seagate and the former chairman and chief executive officer of Maxtor, shared several insights he had learned from building a factory in China.

“Does the cultural difference really matter?” he asked. In theory, he said, it shouldn’t – a business has the same goal anywhere in the world. But in practice, it does.

A second question is whether business ethics can be taught. Park said his experience suggested it could be, at least to a certain extent. For example, he had seen Chinese managers learn that it raises ethical questions to recommend that their employer purchase goods from companies in which they themselves owned stock.

Park is optimistic about the future, particularly because of the vast number of well-educated Chinese and the increasing number who have business experience. He noted that Chinese students are very interested in learning about how Western companies work. “We have lots of obligations in terms of teaching them, showing best practices to them,” he said.

James O’Toole, a senior research scientist at the Center for Effective Organizations at the University of Southern California and an expert on corporate culture and leadership, noted the remarkable transformation of China’s economy, especially in the big cities. He said China’s leaders now seem intent on showing the world that the country is coming into its own. But he also spoke of problems, including a recent trip to Africa by China’s president in which he was “in some cases treated like a 19th century European colonialist.”

He said that Europeans and Americans are reacting differently to the rise of India than to the rise of China. India, with its concepts of democracy and freedom, and its grounding in religious traditions, is more comparable to the West, he said.

Those who assume those values are universal, may be wrong, according to O’Toole. He told of showing the film “Gandhi” to a group of Chinese business people. It’s a film he has used in many countries to launch a discussion of moral leadership. But with this Chinese group, his questions fell flat. Finally one participant said, “‘Gandhi is wrong. If somebody hits you, you hit them back,’” O’Toole recalled.

O’Toole also told of being on the board of a company that built a factory in China; the company was “constantly faced with paying bribes,” he said. The result, in his view, was that the company found itself compromising ethical standards, though not breaking the law.

Finally, O’Toole noted that U.S. corporations needed to get their own house in order if they want to assume moral leadership. And he called “patronizing” the idea that a vibrant civil society and a free press are Western ideals being imposed on China.

Wing Li

Wing Li, managing director of Atelier Capital, said Western countries are hardly immune from ethical problems, citing Enron and insider trading scandals. He noted that a Western perspective on business ethics in China would probably note that corruption is common, particularly in rural areas; that some of China’s cities are among the most polluted in the world; and that corporate governance is rare.

He described his experience from 20 years ago, helping an American company explore a possible joint venture in China. During three years of negotiation, which ultimately ended without the partnership being formed, Li said no one on the Chinese side of the negotiations ever mentioned that the process could be speeded up with a bribe. On paper, China had tough environmental standards – much tougher than those in the U.S.

Li said that despite instances of corruption and unethical business practices, there is also something very positive about Chinese business ethics. And he noted that many of the new generation of Chinese business leaders have been trained in the West, and that there is lots of interest in China in translations of management books.

Margaret Steen is a freelance journalist.

March 2007